Capital Allowances Act 2001 section 70E

Disposal events and disposal values

Section 70E sets out the rules for when a disposal event occurs for a lessee of plant or machinery under a long funding lease, and how to calculate the disposal value that must be brought into account.

• A disposal event is triggered when the lease terminates, the asset starts being used for non-qualifying purposes, or the qualifying activity permanently ceases
• The disposal value is calculated as qualifying expenditure minus the qualifying amount, plus any relevant rebate and any other relevant lease-related payments, with a minimum value of nil
• For operating leases, the qualifying amount is the total depreciation-based deductions claimed; for finance leases, it is the total capital element of lease payments made, excluding finance charges, service charges, and tax reimbursements
• Where a lease is not at arm's length, both the qualifying amount and any rebate or lease-related payment are adjusted to reflect what would have been payable under a commercial transaction